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Bay-Delta Conservation Plan: Preliminary Assessment of Financing Risk Parameters - Jan. 23, 2014
 

Bay-Delta Conservation Plan: Preliminary Assessment of Financing Risk Parameters - Jan. 23, 2014

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Imported Water Committee

Imported Water Committee
Amy Chen, Director of MWD Program

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    Bay-Delta Conservation Plan: Preliminary Assessment of Financing Risk Parameters - Jan. 23, 2014 Bay-Delta Conservation Plan: Preliminary Assessment of Financing Risk Parameters - Jan. 23, 2014 Presentation Transcript

    • Amy Chen, Director of MWD Program Imported Water Committee January 23, 2014
    •  Public draft of BDCP and EIR/EIS released December 13, 2013 ◦ 120 day formal review period ◦ Public meeting scheduled for February 6, 2014 in San Diego at the Convention Center from 3:00pm – 7:00pm  Staff continues its evaluation of the public draft 2
    • BDCP Component Type of Cost1 Capital O&M Total Water Facilities & Operation (CM1) $14,571 $1,456 $16,027 Natural Community Restoration (CM2-CM11) $4,170 $237 $4,406 Other stressors (CM12-CM22) $927 $1,735 $2,661 Changed circumstances $184 - $184 Local government revenue replacement - $226 $226 Monitoring & research measures - $913 $913 Plan admin. - $336 $336 Total2 $19,851 $4,902 $24,754 1 in Millions of 2012 dollars 2 Total may not add due to rounding Source: Bay Delta Conservation Plan, Tables 8-33 and 8-34 3
    •  BDCP envisions costs will be shared between water export contractors and the state and federal governments 4 State & Federal Contractors 69% State funding 17% Federal funding 14% o Exporters: Conveyance facilities and related mitigation costs o State/Federal: Ecosystem restoration costs
    • Funding Source Water Facilities & Operations Nat.Com. Protect. & Mgt. Nat. Com. Restoration Other Stressors Monitoring Research Etc. Program Admin. Total Contractors $16,027 $266 $269 $224 $113 $31 $16,930 USBR $0 $50 $602 $1,077 $640 $100 $2,469 Other Fed Funds $0 $346 $460 $10 $200 $60 $1,076 Props 1E & 84 $0 $0 $142 $21 $0 $0 $163 2014 Water Bond $0 $184 $900 $430 $0 $0 $1,514 Future Water Bond $0 $205 $1,200 $840 $0 $0 $2,245 Other State Funds $0 $10 $40 $0 $145 $0 $195 Interest Income $0 $0 $0 $20 $0 $145 $165 Total Funding $16,027 $1,061 $3,613 $2,623 $1,098 $336 $24,758 Total Cost $16,027 $1,061 $3,610 $2,623 $1,097 $336 $24,754 Difference $0 $0 $3 $0 $1 $0 $4 1 In millions of 2012 dollars Source: Bay Delta Conservation Plan, Public Draft, Chapter 8, December 2013, Table 8-37. 5
    •  State and federal regulations require assurance of funding to issue permits under the habitat conservation plan  Federal ESA requires that HCPs specify “the applicant will ensure that adequate funding for the plan will be provided” for conservation actions – courts have interpreted broadly  ESA case law strongly supports the notion that funding must be assured and an HCP “cannot rely on speculative future actions of others” 6
    •  Cost allocation negotiations between and among state and federal water export contractors are ongoing ◦ Water Authority requested, but is not involved in cost allocation negotiations  BDCP indicates that the actual funding share between state and federal contractors will not be determined until “near the time that permits are issued for BDCP”  Lack of cost allocation certainty hinders the ability to assess cost impacts and risks 7
    •  Because cost allocation has not been finalized, staff analysis uses a bookend approach to potential cost allocation scenarios  Scenarios 1. Contractors pay for only conveyance/mitigation costs of $16.9 billion, with costs shared 55/45 between SWP and CVP 2. All $24.8 billion of BDCP costs paid by contractors, with costs shared 55/45 between SWP and CVP 3. Contractors pay for only conveyance mitigation costs of $16.9 billion, with urban agencies from SWP and CVP paying 90 percent of costs and agricultural agencies paying 10 percent - MWD share assumed to be 58 percent of urban share 8
    • Scenario 1 Scenario 2 Scenario 3 Description Contractors pay for conveyance Cost share between SWP & CVP: 55/45 Contractors pay for all costs Cost share between SWP & CVP: 55/45 Contractors pay for conveyance; Urban and agricultural split: 90/10 Total Cost (Capital and O&M) $16,930M $24,754M $16,930M SWP (or urban in scenario 3) $9,312M $13,617M $15,237M MWD $4,218M $6,168M $8,832M Water Authority $1,055M $1,542M $2,208M 9
    • 10 Scenario 1 Scenario 2 Scenario 3 Description Contractors pay for conveyance Cost share between SWP & CVP 55/45 Contractors pay for all costs Cost share between SWP & CVP 55/45 Contractors pay for conveyance; Urban and agricultural split: 90/10 Annualized Debt Service $1,111M $1,563M $1,111M SWP share (or urban) $611M $859M $1,000M Annualized Debt Service to MWD $277M $389M $579M BDCP Op Scn. High Outflow Low Outflow High Outflow Low Outflow High Outflow Low Outflow Potential Benefit (TAF) 299 424 299 424 299 424 Incremental Unit cost ($/AF) $926 $653 $1,302 $919 $1,938 $1,368 *Analysis varied the cost obligations only, assumes MWD’s share of the BDCP benefits remains constant – i.e., 45.3 percent (Table A) of 55 percent (SWP share).
    •  Funding ◦ Federal and state share – dependent on future bond passage and/or appropriation ◦ Exporters share  Allocation not yet finalized  BDCP “Big Gulp” ◦ Contractors’ ability and willingness to capture and store wet year supply for dry year use critical ◦ Storage fill plan and financing strategy needed at MWD 11
    • Meeting Imported Water Committee/Board Activity 7/25/2013 Provide input on scope of proposed Water Authority analysis of BDCP alternatives; provide input on policy questions to be addressed √ 8/8/2013 Special Meeting Overview of Bay-Delta and proposals for Delta fix, including description of alternatives √ 8/22/2013 Review of technical analysis – demand assumptions; alternative project yield assumptions; projected costs √ 9/12/2013 Special Meeting BDCP economic study on cost-benefit of BDCP preferred alternative √ 9/26/2013 Review of technical analysis (cont.), including yield review √ 10/24/2013 Information: Review of technical analysis (cont.), including baselines; BDCP timeline and processes impacting implementation √ 11/14/2013 Special Meeting Supply and demand evaluation and analysis √
    • Meeting Imported Water Committee/Board Activity 1/9/2014 Special Meeting Identification of BDCP Physical features and facilities; supply/demand risk assessment √ 1/23/2014 Preliminary cost estimates and risk assessment to Water Authority √ 2/13/2014 Special Meeting Engineering assessment of BDCP cost estimates; BDCP Governance 2/27/2014 Economic and risk assessment (cont.) 3/13/2014 Special Meeting Summary presentation of BDCP issues; Identification of issues to be addressed in the EIR/EIS comment letter 3/27/2014 Action: Consider action on final EIR/EIS comment letter 4/24/2014 Revise BDCP schedule; discuss outstanding policy issues; timeline for future board meetings
    • 14
    •  BDCP Update  Overview of BDCP Economic Assessment Issues ◦ Cost Estimates ◦ Funding Sources ◦ Cost Allocation  Preliminary assessment of potential financial impacts  Summary  Next Steps 15
    • 16 $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50 Program Costs (Administration, Monitoring, Research, Other) Other Stressors Conservation Measures (CM13 to CM 21) Habitat Protection and Restoration Conservation Measures (CM2 to CM12) Water Facility Conveyance (CM1, CM22) CapitalCosts (MillionsofUndiscounted2012Dollars) Plan Years Estimated Capital Costs in 5-Year Increments Source: BDCP Executive Summary, Page 28
    • 17 $- $100 $200 $300 $400 $500 $600 1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50 Habitat Protection and Restoration Conservation Measures (CM2 to CM12) Other Stressors Conservation Measures (CM13 to CM 21) Water Facility Conveyance (CM1, CM22) Program Costs (Administration, Monitoring, Research, Other) CapitalCosts (MillionsofUndiscounted2012Dollars) Plan Years Estimated Operational Costs in 5-Year Increments Source: BDCP Executive Summary, Page 28
    •  Unclear whether reliance on federal funding and future state bonds will meet the “adequate funding” test for permit issuance  BDCP public draft indicates that if a shortfall in state or federal funding occurs ◦ Authorized entities will not be required to provide land, water, or monetary resources beyond their commitment in the Plan 18
    •  BDCP public draft indicates the SWP share of new water conveyance system costs could be paid similar to how existing SWP is being paid for ◦ DWR-issued revenue bonds ◦ Take-or-pay contracts for participating SWP contractors ◦ SWP contracts will need to be amended to allow costs to be financed beyond current term of 2035  Individual contractors may issue their own revenue bonds or collectively through a JPA ◦ BDCP public draft identifies State and Federal Water Contractors Water Agency as possible JPA to finance project  JPA formed in 2009 – majority of SWP/CVP contractors are members 19
    •  Incremental unit costs for MWD depend on benefit it receives from BDCP yield ◦ Consumptive need for water ◦ Ability to place water in storage when available  High outflow scenario = 1.2 MAF average annual benefit compared with no action  Low outflow scenario = 1.7 MAF average annual benefit compared with no action  Range of potential average annual benefit to MWD = 299,000 acre-feet to 424,000 acre-feet 20
    •  Aggregate annual debt service and operations costs for the conveyance facility only ◦ Average annual capital debt service costs are approx $1.1 billion from 2021 through 2055 21 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054 2056 2058 2060 2062 2064 $inMillions Figure 4 Aggregate Debt & Operations (Conveyance only) Debt serv O&M
    •  Aggregate annual debt service and operations costs for conveyance plus habitat restoration ◦ Average annual capital debt service costs are approx $1.6 billion from 2021 through 2055 22 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054 2056 2058 2060 2062 2064 $inMillions Figure 5 Aggregate Debt & Operations (Conveyance and Habitat) Debt Serv (CM1) Debt Serv (Habitat) O&M (CM1) O&M (Habitat)